enviri(NVRI) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues totaled $574 million, down 4$85 million, an improvement of 3% year-over-year, driven primarily by Clean Earth [17] - Adjusted diluted loss per share was $0.01 for the quarter, with adjusted free cash flow showing a deficit of$34 million compared to a deficit of $7 million in the prior year [19][20] Business Line Data and Key Metrics Changes - **Harsco Environmental (HE)**: Revenues totaled$279 million, down 2% year-over-year, with adjusted EBITDA of $53 million, slightly lower than the prior year [22] - **Clean Earth (CE)**: Revenues totaled$237 million, down 1% year-over-year, but adjusted EBITDA increased 23% to $42 million, achieving a quarterly margin of 17.5$58 million with an adjusted EBITDA loss of $2 million, impacted by lower aftermarket and contracted services volumes [24] Market Data and Key Metrics Changes - The global steel market is experiencing a downturn due to excess capacity in China and reduced demand in key geographies, affecting HE's performance [9][28] - Demand for equipment aftermarket parts and services remains healthy outside of China, with a strong pipeline for Rail [10][26] Company Strategy and Development Direction - The company is focused on creating shareholder value through operational plans and strategic evaluations, aiming for EBITDA in excess of$400 million by 2027 [13] - There is a shift in the customer and contract mix towards growth markets such as India, Turkey, and Mexico, which is expected to provide a tailwind for future growth [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the steel market and operational issues in Rail but remains optimistic about Clean Earth's growth and margin improvement [7][10] - The company expects a positive inflection in cash generation in 2025, driven by reduced pension contributions and improved Rail performance [31] Other Important Information - The company successfully exceeded its goal of generating $50 million to$75 million from asset sales, primarily from noncore businesses [11] - The pension fund in the UK is now fully funded, eliminating the need for further contributions [11] Q&A Session Summary Question: Impact of lower volumes in HE and cost flexibility - Management indicated that fixed fees provide some protection against volume declines, but there is still an impact until a certain threshold is reached [36] Question: Volume growth in Clean Earth - Clean Earth is experiencing healthy volume growth in the Health Care segment, while the industrial sector has shown softness [38] Question: Contract win/loss in the environmental segment - Management emphasized a strong pipeline of growth opportunities and a geographic shift towards growth markets [43][44] Question: Clean Earth's margin expansion potential - Management noted that future volume growth is expected to drive further margin expansion in Clean Earth [46] Question: Cash flow expectations for next year - Management expects significant improvement in Rail's cash performance, alongside reduced pension contributions and interest costs [49][50] Question: ETO contracts timeline and cash generation - Positive cash flow from smaller ETO contracts is expected next year, with larger contracts projected to generate substantial cash flow by 2027 [52] Question: Impact of Hurricane Helene on sales and EBITDA - The hurricane caused delays in shipments, impacting EBITDA by approximately $1 million to$2 million [53] Question: Noncontrolling interest and dividends - The gap between dividends and earnings is attributed to timing, with accumulated earnings leading to distributions [58]